David Cay Johnston: Taxed By The Boss

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Across the United States more than 2,700 companies are collecting state income taxes from hundreds of thousands of workers – and are keeping the money with the states’ approval, says an eye-opening report published on Thursday.

The report from Good Jobs First, a nonprofit taxpayer watchdog organization funded by Ford, Surdna and other major foundations, identifies 16 states that let companies divert some or all of the state income taxes deducted from workers’ paychecks. None of the states requires notifying the workers, whose withholdings are treated as taxes they paid.

General Electric, Goldman Sachs, Procter & Gamble, Chrysler, Ford, General Motors and AMC Theatres enjoy deals to keep state taxes deducted from their workers’ paychecks, the report shows. Foreign companies also enjoy such arrangements, including Electrolux, Nissan, Toyota and a host of Canadian, Japanese and European banks, Good Jobs First says.

Why do state governments do this? Public records show that large companies often pay little or no state income tax in states where they have large operations, as this column has documented. Some companies get discounts on property, sales and other taxes. So how to provide even more subsidies without writing a check? Simple. Let corporations keep the state income taxes deducted from their workers’ paychecks for up to 25 years.

It was not always this way. Letting companies keep their workers’ state taxes apparently began in Kentucky two decades ago as a way to retain jobs.

Last July when I wrote about six big companies that pocket Illinois state taxes I knew there was more to this. But I had no idea how pervasive these diversions were until I read an advance copy of the 39-page report by Good Jobs First.

Deals cut with the states over the past two decades diverted $5.5 billion from public purposes to private gain, the report says. Close to $700 million more was diverted last year, Good Jobs First estimates.

New Jersey approved $73.2 million in new deals in 2011 on top of $178 million diverted that year alone under previous deals. I calculate that at nearly $80 per household in corporate welfare based on New Jersey’s 3.1 million households.

These deals typify corporate socialism, in which business gains are privatized and costs socialized. They also mean government picks winners and losers, interfering with competitive markets. Leaders in both parties embrace these giveaways because they draw campaign donations from corporate interests and votes from people who do not understand that they are subsidizing huge companies.

Michael Press, a Connecticut consultant on tax incentives, says such deals, however troubling, are an inevitable result of the U.S. Constitution setting up competition between the states.

“In an ideal world we would not provide any corporate subsidies,” Press told me. “It looks like corruption. But if you do it right, if you only target those companies whose behavior you change to create jobs or keep jobs in your state then these targeted temporary arrangements are cheaper – much cheaper – and can be more effective than an overall reduction in tax rates.”

32 responses to “David Cay Johnston: Taxed By The Boss”

State incentives for employment are a negative sum game for the states. The Federal government should tax any corporate incentives received from a state. This would end the practice and force states to compete by offering a better environment rather than tax dollars.

Socialism sucks whether it’s corporate or personal and it has NO place in America. No matter what form it takes, socialism ALWAYS involves taking from someone else and giving to another who is politically favored. IT ALL SUCKS! Someone always loses.

Finally a writer on The Memo that understands privatized gains and socialized costs. It’s a bad deal for everyone except the pols and their crony business budies. This is EXACTLY the same problem with Obozo’s Green Jobs blunder where he rapes us taxpayers to pay off his rich financier buddies who make stupid investments. [read Solyndra, Solar Trust, etc. etc.]

There must be change, I agree with you whole heartedly. But new products and better ways of supplying energy need to be addressed. There will be failures,we can keep digging for hard to reach oil at the same time start to implement changes. It won’t be cheap in the beginning and how we get the money will also be controversal to a close minded few.

United States was always first with technology, ideas do we really want china to be the ones?

Obozo, it seems your comment on everything deals with Obama, not even minding that the issue deals with state governors cutting deals. Your hatred for Obama must really be preventing you from getting a good night’s sleep. Please get a life, and deal with the fact that Obama is our president and that you can’t change that.

Oko… so State sponsored socialism for business is NOT good, but socialism practiced and espoused by your messiah Obozo is OK? Sorry, dude. It ALL sucks! No matter who practices it.

By the way, Oko, as a mattter of fact, I can change Obozo from being president…. it’s called ELECTIONS! And Obozo will be soundly pounded and bounced from office like he deserves to be this coming November!

Well, its finally cought up to the states that allow this. And some in congress say that we must give up olur way of life and give them more over the next ten years. There is a great deal at stake here for future generations..Are we going to have record number of uneducated kids or we going to live byu what made america a great country. Ive been watching this for a long time and wondered when people would wake up to this..i guess when it hits your pocket you wake up..kno what i mean..

I live in NJ and Gov.Christie has gone after public workers pensions and especially the teachers of which I’m not one. In typical republican fashion he rewards the corporations with a tax give back of 178 million while not paying the state portion of the pension saying it’s too costly. The 2 companies he rewarded Goldman and Verizon have loads of cash and don’t need an incentive to stay here. Goldman can only go back to NY and pay more taxes or Conn, and be farther away from Wall St. Verizon started here as NJ Bell and is running Fios lines across the state so it will be here for a long time regardless of state tax give backs. On top of this Christie wants to cut the tax rate for millionaires. He bullies anyone that questions him, and because he is a typical Jersey guy( ala Sopranos) people like his bravado. We have bridges and roads that need repair , we are laying off teachers, fireman, police, and other essential workers our pension system has a shortfall, and his answer it to give away needed tax money to companies that don’t need it. Typical Republican: giving to those that don’t need it, and taking from those that do!

There you have it..this article should speak volumes. We all have to pay for the right of living in the united states of america and why shouldnt a corporation which makes huge riches from us. This is exactly the reason why we are losing firefighters, teachers,ect. The state govt places little or no value on their people and auctions them off. That is just “NOT RIGHT”. tAXES ARE OUR QUALITY OF LIFE AND PAY FOR THE STANDARDS WE ALL LIVE BY. This is so backwards its not funny. I agree with all kinds of reforms but everybody needs them including corporations. We are all striving for the same thing but the average person is put at a huge disadvantage. Im so ver depressed with the GOP and their way of thinking..How many politiocians get kick backs from doing that? sounds like its illegal to me! Our president had a bill dealing with specul;ators and taxing the very people a small percentage to get control on gas speculation and start fixing our infrastructure and the GOP killed it..how will we ever recover as a nation if the very people who didnt pay into the systenm they got rich from to survive or get back on its feet? Now they lobby the GOP to institute RIGT TO WORK or Right To Fire, lower your wage and health insurance at anytime they choose laws. Last I heard, corporations were flush with cash so why this assault on the people? CLEAN HOUSE IN WASHINGTON, THEY WOKE UP THE AMERICAN PEOPLE FOR SURE AND IM VERY UPSET!

Genny Abbott–Could not agree more with above comment. I thought I was pretty up on things & was aware of alot of corruption in government & whole military industrial comlex; big corporations affecting healthcare,pharmaceuticals; insurance companies, whole medical/hospital/clinics; medical equipment companies all different specialties of practice with separate charges to 1 patient, while all these groups form huge conglomurate monopolies; same with big universities & bearacratic administrators in our education raking in doughwith escalating costs to students & parents (while they dumb down education); same with big agribusiness, machinery manufacturing;,big food (processeed) manufacturing conglomerates; &, of course, the irressponsible big oil industry–These are all interwoven; intricately interwoven (oh yes , & the corrupt big banks & financiers,credit bureaus,& crit conpanies) & emmeshed so finely , deeply, & secretively to average consumer so all but those at top pinnacles get ripped. This latest exposure about state income taxes being ripped off at expense of safety measures,improvements in infrastructure environment; education; provisions for health care; any measures to benefit the average or needy person, or the state, or country, is the icing on the cake–most disgusting, despicable thing I’ve ever heard. Hyprocrisy supreme as the far “right” screams about “socialism” of democratic or progressive policy makers, while they practice this corporate socialism to destroy or bring down & denegrate the average individual. Having lived & traveled in other countries, it becomes harder to tolerate living in this one & watching it go down like the Titanic. And for me, the worst is that religion & faith have been hijacked into man-made idolatries that have the audacity to put the name of God behind their ideology & behavior in order to squelch, brainwash, & control other people. Hard to watch; to experience first-hand & to tolerate. My aim is to watch myself that I never end up stooping to the same level of character (lack of it) & same type of behavior. It can start out subtly-creeping in, & then grow like a cancer.

This should be a major eye opener to everyone. Of course posters will try to put a partisan spin on it,but this goes far beyond red/blue lines, this is at the heart of the American promise that everyone gets treated fairly.

These issues are just part of the problem.Of course we don’t want to support corporations with money that should be going to the states.Of course these agreements made without full transparency are WRONG on every level. The real issue here is how do we get this message to the people of this country ? The comment by hubydoll asks the question are we as dumb as they think we are ? Unless we can get this issue to the American public , the answer is yes ! We collectively read these articles so we can become aware of the issues facing the countrys financial health but if we are the only ones reading them our votes will be lost in the fog spread by Fox News and the like. How can we speak to the masses without being beat down by the smear machine supported by Corporate America? How do we spread the word ?? I sincerely doubt that workers in these corporations would agree that diverting tax money from the state to the corporation when we’re laying off firefighters and teachers is a good idea , but who will inform the workers ??

Notice how many of these states are Republican dominataed?? Americans need to wake the hell up and start taking a good long look at who is running their state! Educate yourself and the issues, petition to get initiatives going that could change the law and then VOTE!!! Make our public officials responsible.

I had always believed these tax break deals were that Corp’s didn’t pay the tax. Not collect the tax from the employee’s and then pocket it. Thanks for shedding light on this corrupt anti-worker policy.

This sort of thing makes any comparative analysis of individual, corporate, and small-business taxation a JOKE. When will Americans finally admit that the system of commerce under which they live is the ANTITHESIS of free enterprise ?

Not only states but also municipalities! I live in Kansas City, Missouri where we pay a one percent Earnings tax on our personal income. Any one who lives OR works in the city limits has to pay and the money is collected by the company and paid in weeks, quarters, etc. As an incentive to businesses, the City of KCMO gives what they call a package that gives either half or all of the E-tax money from the employees back to the company for a certain period of time. The intention is to get the company on its feet so it can start paying it fair share. Every time the date for going off of the program ends the company ups and leaves the city or state. Wonder why? The kicker is that all the money collected from the employees goes right back to the company never to be seen again. Think of this on a local, state and federal level and we wonder why personal income has gone down over the years.

me3, hubbydoll. But some of our brothers and sisters will support the same groups of self serving bastards that have turned the USA from a country where most people had rising expectations (that were mostly met) in the 50-60s into a country where most of the rank and file have no expectations and can barely exist because the manufacturing jobs were allowed to drift or cheerfully sent overseas in the 70-90s. Snatching state taxes to add to the bottom line is just another way big business adds to its profligate profits. Adopt the ‘Buffet’ rule but let it extend to corporations. Take their tax money, pay off national debt, rebuild our infrastructure while creating millions of new jobs and use some to educate our greatest resource to be the best in the future world.

The real loss of money from the taxpayers is through the state and federal governments. If we would give people incentives to go back to work, instead of continuing to pay people to sit on their asses and do nothing, taxpayers and businesses would be able to continue to operate at a profit. As a small business owner, I can barely meet obligations, once I’ve worked to help pay for the lazy bastards.

This is not just a Republican idea. It was pushed by the Governor’s business development office in Oregon, Business Oregon. And this is with a Democratic Governor. The only example given for who the bill is for was a business in another state that wants to “come home” to Oregon.